EXECUTIVE EMPLOYMENT
AGREEMENT
This Executive
Employment Agreement (“Agreement”) is made effective as
of March 18, 2009 (“Effective Date”), by and
between Pet DRx Corporation, a Delaware corporation
(“Company”), and Harry L. Zimmerman
(“Executive”).
WHEREAS, the
Company desires to employ the Executive and retain his services,
experience and abilities; and
WHEREAS, the
Executive desires to accept such employment upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in
consideration of the promises and the mutual covenants contained
herein, it is agreed as follows:
1.
Duties/Position . The Company hereby employs the
Executive and the Executive hereby accepts such employment under
all of the terms and conditions of this Agreement. The
Executive’s principal place of business shall be at an office
in Austin, Texas, subject to periodic travel to the Company’s
corporate office located in Brentwood, Tennessee and other required
business travel. The Executive shall be an officer of the Company,
and shall hold the office of Executive Vice President, Chief
Financial Officer and Chief of Business Development, reporting to
the Company’s Chief Executive Officer.
2.
Employment Term . The term of Executive’s
employment under this Agreement shall commence as of the Effective
Date and shall continue until the date of termination of employment
in accordance with Section 5 (the “Employment
Term”).
3.
Executive’s Duties, Responsibilities, and
Authority .
a. The Executive
shall have and perform diligently the duties of Executive Vice
President, Chief Financial Officer and Chief of Business
Development and such other such duties as may be directed by the
Chief Executive Officer of the Company and commensurate with such
position and in accordance with the Company’s
By-laws.
b. During the
Employment Term, Executive shall perform his duties consistent with
his experience and abilities in furtherance of the Company’s
interests and shall devote his time, attention, skill and energy to
his duties and the performance of the services, and the Company
will be entitled to all of the benefits and profits arising from or
incident to all such work and services.
c. The Executive
will expend his best efforts on behalf of the Company, and will
abide by all Company policies and procedures of which he has been
given notice, as well as all applicable laws and
regulations.
4.
Compensation . In consideration of the services to be
rendered by the Executive, the Company agrees to compensate and to
provide benefits to the Executive as follows:
a. Base
Salary . As compensation for Executive’s performance of
all of his duties hereunder, Company shall pay to Executive an
annual base salary of Three Hundred Thousand Dollars ($300,000)
(“Annual Base Salary”), payable in installments at such
times as the Company shall pay its other senior level executive
officers, less required deductions for state and federal
withholding tax, social security and all other employment taxes and
payroll deductions. The Board of Directors of the Company (the
“Board”) shall review the Annual Base Salary at least
annually for merit increases; provided, however, that any increase
in Executive’s Annual Base Salary shall be at the
Board’s sole discretion.
b. Bonus
Opportunity . The Board may, in its sole and absolute
discretion, award the Executive an annual cash bonus.
c. Benefits
. Executive shall be eligible for participation in, and shall
receive all benefits under, the benefit plans, practices, policies
and programs provided by Company to the extent generally applicable
to senior level executives of the Company, subject to the terms and
conditions of the Company’s benefit plan documents, policies
or programs, as adopted from time to time. The Company reserves the
right to change or eliminate the Company’s benefit plans,
practices, policies or programs at any time.
d. Vacation
. From and after the Effective Date, Executive shall be entitled to
four (4) weeks annual paid vacation per full calendar year
worked in accordance with the plans, policies, and programs of the
Company as in effect for senior level executives of the Company.
For 2008, vacation entitlement shall be prorated based on days
worked in 2008 from November 18, 2008.
e. Expenses
. Executive shall be entitled to receive prompt reimbursement in
accordance with the Company’s reimbursement policies for all
reasonable, out-of-pocket business expenses incurred in the
performance of his duties on behalf of Company (including mobile
telephone usage). To obtain reimbursement, expenses must be
submitted promptly with appropriate supporting documentation in
accordance with Company’s policies.
5.
Termination . Notwithstanding any other provision of
this Agreement, the Agreement and the Executive’s employment
hereunder shall be terminated as follows:
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a. Termination
by the Company With Cause .
i. The Company may
terminate this Agreement and the Executive’s employment for
Cause, as defined herein, upon written notice to the Executive
setting forth in reasonable detail the facts and circumstances upon
which the Board shall have determined, following reasonable
inquiry, that Cause exists.
ii. As used
herein, “Cause” shall mean (i) any willful,
material violation of any law or regulation applicable to the
business of the Company or any affiliate of the Company;
(ii) conviction for, or guilty plea to, a felony or a crime
involving moral turpitude, or any willful perpetration of a common
law fraud; (iii) commission of any act of personal dishonesty
which involves personal profit in connection with the Company or
any affiliate of the Company; (iv) any material breach of any
provisions of any agreement or understanding between the Company or
any affiliate of the Company and Executive regarding the terms of
Executive’s service as an employee, officer, director or
consultant to the Company or any affiliate of the Company,
including, without limitation, the willful and continued failure or
refusal to perform the material duties required of Executive as an
employee, officer, director or consultant of the Company or any
affiliate of the Company (other than as a result of Disability) or
a breach of any applicable creative works assignment and
confidentiality agreement or similar agreement between the Company
or any affiliate of the Company and Executive; (v) disregard
of the policies of the Company or any affiliate of the Company, so
as to cause material loss, damage or injury to the property,
reputation or employees of the Company or any affiliate of the
Company; or (vi) the Executive is in breach of the terms of
Sections 6, 7 and/or 8 hereof; provided, however, for purposes
of subclauses (iv), (v) and (vi), no such action for omission,
separately or together, shall constitute an event of
“Cause” unless the Board gives written notice to the
Executive specifying the act(s) or omission(s) the Board believes
to be Cause and gives the Executive an opportunity to cure or amend
such contract to the reasonable satisfaction of the
Board.
iii. If the
Company terminates the Executive’s employment for Cause, then
the Executive shall be entitled only to the “Accrued
Obligations.” For purposes of this Agreement, the Accrued
Obligations shall mean: (i) all accrued but unpaid Annual Base
Salary as of the date of termination; (ii) any unpaid or
unreimbursed expenses incurred in accordance with Company policy,
including amounts due under Section 4(c) and (e) hereof, to
the extent incurred during the Employment Term; (iii) any
benefits provided under the Company’s employee benefit plans
upon a termination of employment, in accordance with the terms
therein, including vested stock options and rights to equity in the
Company to the extent provided pursuant to the applicable plan or
agreement; and (iv) rights to indemnification by virtue of the
Executive’s position as an officer or director of the Company
or its subsidiaries and coverage under any directors’ and
officers’ liability insurance policy maintained by the
Company, in accordance with its terms thereof.
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b. Termination
by the Executive for Good Reason . The Executive may terminate
this Agreement and his employment for Good Reason, as defined
herein; upon written notice to the Board setting forth in
reasonable detail the facts and circumstances upon which the
Executive shall have determined that Good Reason exists. For
purposes herein, “Good Reason” shall mean the
occurrence of any of the following without the Executive’s
express, written consent:
i. the assignment
to the Executive of any duties or the reduction of the
Executive’s duties, either of which results in a significant
diminution in the Executive’s position or responsibilities
with the Company in effect immediately prior to such assignment, or
the removal of the Executive from such position and
responsibilities;
ii. in the event
of a Change in Control (as defined below), the Executive is not
appointed as the Chief Financial Officer of the acquirer, unless
the Executive rejects the offer of the position;
iii. a reduction
by the Company in the Annual Base Salary of the
Executive;
iv. the Company
requires the Executive to have a principal office other than within
the Austin, Texas greater metropolitan area; or
v. a material
breach by the Company of this Agreement, including, without
limitation, the failure of the Company to pay any material item of
compensation substantially when due;
provided,
however, that for a termination of employment by the Executive to
be for Good Reason, the Executive must notify the Company in
writing of the event giving rise to Good Reason within sixty
(60) days following the occurrence of the event (or if later
the Executive’s knowledge of occurrence of the event), the
event must remain uncured after the expiration of thirty
(30) days following the delivery of written notice of such
event to the Company by the Executive, and the Executive must
resign effective no later than thirty (30) days following the
Company’s failure to cure the event. In the event that the
Executive’s employment is terminated by the Executive for
Good Reason, the Executive shall be entitled to the same payments
and benefits described in Section 5(c).
As used in
clause (ii) above, “Change in Control” means the
occurrence of either of the following events:
(A) the
acquisition by any one person, or more than one person acting as a
group (other than any person or more than one person acting as a
group who is considered to own more than fifty percent (50%) of the
total fair market value or total voting power of the stock of
Company prior to such acquisition), of stock of Company, that,
together with stock held by such person or group, constitutes more
than fifty percent (50%) of the total fair market value or total
voting power of the stock of Company; or
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(B) within any
twelve-month period (beginning on or after the Effective Date) the
acquisition by any one person, or more than one person acting as a
group, of the assets of Company, that have a total gross fair
market value of sixty-five percent (65%) or more of the total gross
fair market value of all of the assets of Company, immediately
before such acquisition or acquisitions;
provided,
however, that transfers to the following entities or person(s)
shall not be deemed to result in a Change of Control:
(I) an entity as
to which the shareholders of Company immediately before the
transfer continue to own, directly or indirectly, immediately after
the transfer, more than fifty percent (50%) of the total fair
market value or total voting power of the stock, immediately after
the transfer;
(II) an entity,
more than fifty percent (50%) of the total fair market value or
total voting power of the stock of which is owned, directly or
indirectly, by Company; or
(III) any employee
benefit plan maintained by or contributed to by Company.
For purposes of
this definition of Change in Control, persons will be considered to
be acting as a group if they are owners of a corporation that
enters into a merger, consolidation, purchase or acquisition of
stock, or similar business transaction with Company.
Notwithstanding the foregoing, no Change in Control shall be deemed
to have occurred for purposes of this Agreement by reason of any
actions or events in which the Executive participates in a capacity
other than in the Executive’s capacity as an employee. It is
intended that this definition of Change in Control be consistent
with the definition of a “change in the ownership of a
corporation” or a “change in a substantial portion of
the assets of a corporation” within the meaning of Code
Section 409A, and this definition shall be construed
consistent with such intent.
c. Termination
by the Company Without Cause . The Company may terminate this
Agreement and the Executive’s employment without Cause at any
time. In the event that the Executive’s employment is
terminated by the Company without Cause (other than due to the
Executive’s death or Disability), the Executive shall be
entitled to:
i. the Accrued
Obligations, which shall be paid when such amounts would have been
paid if the Executive has remained employed following such
termination by the Company without Cause;
ii. an amount
equal to twelve (12) months of Annual Base Salary which shall
be paid in accordance with the Company’s payroll practices;
provided, however that if such termination of employment occurs
within twelve (12) months following a Change in Control, such
total amount shall be paid in a single lump sum;
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iii. effective on
the date of the termination of employment, all stock options
granted to Executive that are unvested shall become fully vested
and exercisable as of the effective date of the Executive’s
termination of employment; and
iv. continuation
of the health benefits (only under the Company’s or its
successor’s medical and dental insurance plans, if any) in
accordance with this paragraph for the lesser of two (2) years
or the period that the Executive is entitled to continuation of
health coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”); provided that the
Executive must elect COBRA coverage to be entitled to this benefit,
and provided further that:
(A) if any such
plan is fully insured, then the Executive shall be required to pay
as each COBRA premium an amount equal to the allocable share of the
cost of coverage for similarly situated active employees of the
Company under such plan; or
(B) if any such
plan is not fully insured, the Executive shall be required to pay
the full COBRA premium and the Company will reimburse the Executive
for a portion of the COBRA premium charged to the Executive that
represents the Company’s allocable share of the cost of
coverage for similarly situated active employees of the Company
under such plan;
provided,
however, that as a condition of receiving the payments and benefits
in clauses (ii), (iii), and (iv), the Executive shall execute, date
and return to the Company on or within twenty-one (21) days
after the delivery date (and not timely revoke during any
revocation period provided therein) a comprehensive release,
covenant not to sue, and non-disparagement agreement from the
Executive in favor of the Company, its executives, officers,
directors, affiliates, and all related parties, in the form
attached hereto as Exhibit A ; provided, however, that
the release will not apply to the payment and benefits described in
clauses (i) through (iv).
d. Termination
By Reason of Death or Disability .
i. This Agreement
will terminate automatically upon the Executive’s death. The
Company may terminate Executive’s employment at the
expiration of the Disability Period (as defined below), such
termination to be effective upon Executive’s receipt of
written notice of such termination.
ii. In the event
the Executive’s employment is terminated due to his death or
at the expiration of the Disability Period (as defined below), the
Company shall not be obligated to provide the Executive any
compensation or benefits (other than the Accrued Obligations) after
the effective date of such termination except as required by law or
regulation.
iii. For purposes
of this Agreement, “Disability” shall mean any physical
or mental disability or infirmity that prevents the performance of
the
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Executive’s duties. Any question as to the
existence, extent or potentiality of the Executive’s
Disability upon which the Executive and the Company cannot agree
shall be determined by a qualified, independent physician selected
by the Company and approved by the Executive (or the
Executive’s duly appointed representative), which approval
shall not be unreasonably withheld. The determination of any such
physician shall be final and conclusive for all purposes of this
Agreement.
iv. For purposes
of this Agreement, “Disability Period” means a period,
beginning on the date the Company determines that the Executive is
subject to a Disability and ending on the earlier of the date the
Executive begins receiving income replacement benefits under any
long term disability plan or policy maintained by the Company or
the date that is six (6) months after such determination,
during which the Executive remains subject to a
Disability
e. Effect of
Termination . If the Company terminates this Agreement as
provided herein, it shall not be obligated to provide the Executive
any compensation or benefits after the effective date of such
termination except as otherwise set forth in this Section 5
and as required by law or regulation. The Executive’s
entitlement to any amount of severance or other post-termination
benefits under this Agreement shall be subject to the following
conditions:
i. All payments of
severance and other post-termination benefits under this Agreement
shall accrue from the date of termination and shall be made or
commence no later than the sixtieth (60th) day following the
Executive’s termination of employment, with any accrued but
unpaid severance or benefits being paid or provided on the date of
the first payment; provided, however, that if the Executive is a
“specified employee” within the meaning of Code
Section 409A, at the date of his termination of employment,
then such portion of the payments or benefits under Section 5(b) or
5(c) that would result in a tax under Code Section 409A if
paid during the first six (6) months after termination of
employment shall be withheld, starting with the payments latest in
time during such six (6) month period, and paid to the
Executive during the seventh month following the date of his
termination of employment; and
ii. For purposes
of Sections 5(b) and (c), the Executive will have experienced a
termination of employment only if either (i) the Executive has
ceased to perform any services for the Company and all affiliated
companies that, together with the Company, constitute the
“service recipient” within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder (collectively, the “Service
Recipient”) or (B) the Service Recipient and the
Executive reasonably anticipate that the level of bona fide
services the Executive will perform for the Service Recipient after
a given date (whether as an employee or as an independent
contractor) will permanently decrease (excluding a decrease as a
result of military leave, sick leave, or other bona fide leave of
absence if the period of such leave does not exceed six months, or
if longer, so long as the Executive retains a right to reemployment
with the
7
Service
Recipient under an applicable statute or by contract) to no more
than twenty percent (20%) of the average level of bona fide
services performed for the Service Recipient (whether as an
employee or an independent contractor) over the immediately
preceding 36-month period (or the full period of service if the
Executive has been providing services to the Service Recipient for
less than 36 months).
f. Employment
Status . Executive’s continued employment with the
Company is subject to the ongoing review and approval of the
Company and its Board in their sole and absolute discretion. Except
as otherwise provided for herein, all terms and conditions of
employment (such as hours of work, job duties and benefits, etc.)
are subject to change by the Company at any time and for any
reason. Similarly, the Company has the same right to terminate the
employment relationship at any time and for any reason, or for no
reason, with or without Cause. Executive further understands that
he is an “at-will” employee of the Company, and that
this “at-will” relationship cannot be modified except
by written agreement between the Executive and the Company. Nothing
in this Section shall be construed to take away any rights that the
Executive has during the Employment Term pursuant to this
Agreement, including his rights pursuant to Sections 5(b) and 5(c)
hereof.
6.
Confidentiality . Concurrently herewith, Executive shall
execute the Company’s standard form Confidentiality and
Assignment of Creative Works Agreement (the “Confidentiality
Agreement”), a copy of which is attached hereto as
Exhibit B . The Confidentiality Agreement shall remain
in full force and effect in accordance with the terms thereof and
shall survive the termination of this Agreement.
7.
Non-Competition; Non-Solicitation .
a. The Executive
agrees that, during his employment with the Company and for one (1)
year following his termination of employment for any reason (the
“Applicable Period”), the Executive will not (except on
behalf of or with the prior written consent of the Company, which
consent may be withheld in Company’s sole discretion), within
the Area (as defined below), either directly or indirectly, on his
own behalf, or in the service of or on behalf of others, provide
managerial services or management consulting services substantially
similar to those Executive provides for the Company to any person,
firm, corporation, joint venture, or other business that is engaged
in the same or a substantially similar business as the business of
the Company, other than the Company or an affiliate of the Company.
The Executive acknowledges and agrees that the business of the
Company is conducted in the Area. For purposes of this
Section 7(a), the “Area” means any area within a
fifty (50) mile radius of the Company’s principal
corporate offices in the State of Tennessee; any area within a
twenty-five (25) mile radius of any location where the Company
or an Affiliate conducting the business of the Company opens a
veterinary clinic on or after the Effective Date and prior to the
termination of the Executive’s employment hereunder; and any
area within a fifty (50) mile radius of any location where the
Company or an Affiliate conducting the business of the
Company
8
opens a
specialty veterinary hospital on or after the Effective Date and
prior to the termination of the Executive’s employment
hereunder.
b. The Executive
agrees that during the Applicable Period, he will not, either
directly or indirectly, on his own behalf or in the service of or
on behalf of others, solicit any individual or entity which is an
actual or, to his knowledge, actively sought prospective client of
the Company or any of its Affiliates (determined as of date of
termination of employment) with whom he had material contact during
the last two (2) years of the Executive’s employment
with the Company, for the purpose of offering services
substantially similar to those offered by the Company.
c. Executive
understands and agrees that the Company’s employees and any
information regarding the Company’s employees is confidential
and constitutes trade secrets. Accordingly, Executive agrees that
during the Applicable Period, Executive will not, either directly
or indirectly, separately or in association with others, interfere
with, impair, disrupt or damage the Company’s business by
soliciting or attempting to hire or hiring any of Company’s
employees or causing others to solicit or encourage any of the
Company’s employees to discontinue their employment with the
Company; provided, however, that Executive being named as a
referral on the resume of a Company employee and Executive
responding to inquiries resulting therefrom shall not violate this
Agreement.
d. Executive
agrees that these covenants are reasonable with respect to their
duration, geographical area and scope. Executive acknowledges that
Executive’s breach of the covenants contained in this Section
would cause irreparable injury to the Company and agrees that in
the event of any such breach, the Company shall be entitled to seek
temporary, preliminary and permanent injunctive relief without the
necessity of proving actual damages or posting any bond or other
security. Executive also acknowledges that each of these covenants
survives termination of this Agreement for any reason.
e. In the event
that this Section 7 is determined by a court which has
jurisdiction to be unenforceable in part or in whole, the court
shall be deemed to have the authority to strike any unenforceable
provision, or any part thereof or to revise any provision to the
minimum extent necessary to be enforceable to the maximum extent
permitted by law.
8.
Executive Representations . The Executive represents
that:
a. Executive is
entering into this Agreement voluntarily and that his employment
hereunder and compliance with the terms and conditions hereof will
not conflict with or result in the breach by him of any agreement
to which he is a party or by which he may be bound;
9
b. he has not, and
in connection with his employment with the Company will not,
violate any non-solicitation or other similar covenant or agreement
by which he is or may be bound; and
c. in connection
with his employment with the Company he will not use any
confidential or proprietary information he may have obtained in
connection with employment with any prior employer.
9.
Indemnification of the Executive . The Company shall
indemnify the Executive to the extent provided under the
Company’s Articles of Incorporation or By-laws, and any
separate indemnification agreement between the Company and the
Executive, if any.
10.
Taxes . Notwithstanding anything contained herein to the
contrary, all payments made under this Agreement shall be subject
to withholding for all applicable taxes, including, but not limited
to, income, employment and social insurance taxes, as shall be
required by law. The Company and the Executive desire that the
benefits and payments described in this Agreement be exempt from,
or comply with, the requirements of Code Section 409A. To that
end, if the Executive suggests any amendments to this Agreement
that the Executive believes will make certain benefits or payments
under this Agreement exempt from or compliant with Code
Section 409A, the Company will use reasonable efforts to
cooperate with the Executive in negotiating and implementing any
such amendments, provided that such amendments do not, in the sole
discretion of the Company, have a cost to the Company (apart from
legal fees associated with negotiating, drafting and submitting any
required regulatory filings), or adversely affect the Company in
any manner. Notwithstanding the foregoing, the Company makes no
guarantee as to any tax consequences relating to this Agreement,
and the Company does not represent or warrant that any payments or
benefits under this Agreement are exempt from or compliant with
Code Section 409A. Further, the Executive shall be responsible
for his own taxes under this Agreement, including, if and to the
extent applicable, taxes under Section 409A and 4999 of the
Internal Revenue Code.
11.
Governing Law; Arbitration; Expenses .
a. This Agreement
shall be governed and construed in accordance with the laws of the
State of Delaware without regard to its principles regarding choice
of law. Subject to Section 11(b), the parti
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